TMI Blog2017 (6) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... ed us towards the conclusion that the satisfaction note was not recorded by the DCIT, Central circle 17, New Delhi, in the capacity of a Assessing Officer of searched person, which is one of the essential requirement for invoking jurisdiction under section 153C of the Act and in absence of which proceedings initiated under section 153C of the Act are not validly initiated. Accordingly, we quash those proceedings. - Decided in favour of assessee. - ITA Nos. 1074 to 1079/Del/2012, And C.O. Nos. 133 to 138/Del/2012 - - - Dated:- 31-5-2017 - SH. SIDHU, JUDICIAL MEMBER, AND SH. O.P. KANT, ACCOUNTANT MEMBER For The Department : Sh. Naveen Chandra, CIT(DR) For The Assessee : Ms. Ananya Kapoor Sh. Sumit Lalchandani, Advocates ORDER PER O.P. KANT, A.M.: These six appeals of Revenue and six cross objections of the assessee are directed against common order dated 05/12/2011 of learned Commissioner of Income-tax (Appeals)-II, Delhi, [In short the CIT(A) ] for assessment year 2003-04 to 2008-09 respectively. The issues involved in the appeals and cross objections in different years are identical and connected, and therefore these were heard together and adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in indefinitely. The learned CIT(DR) is directed to pursue the matter for constitution of Special Bench before the Hon ble President within one month from today or argue matter after that period. No further adjournment shall be granted on this ground. Matter is adjourned to 25.01.17 as last opportunity to revenue. Both sides informed. 4. On 25/01/2017 again the case was adjourned and the parties were informed as under: 25.01.17 Hearing adjourned to 16.05.17 at the request of the A s counsel. Last opportunity to both sides. Both sides informed. 5. In the above background of last opportunity provided twice, in the hearing dated 16/05/2017, the parties were directed to argue their cases. The Ld. counsel reiterated to adjourn the cases and expressed inability in arguing cases. The Ld. CIT(DR) was also not prepared to argue the appeals. In the circumstances, all the appeals and cross objections were treated as heard and the parties were directed to file written submission, if they desired so, within three days. cases are adjudicated on the basis of the written submissions and material available on record. 7. In the written submissions filed by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.03.2012 but this is not based on any documentary evidence and the Hon'ble Bench needs to investigate its records (especially the Dispatch Register) and to direct the assessee to place necessary evidence on records in support of its claim that it received notice only on 30.03.2012. Reference is invited to Para 18(4)-page 21 of the Office Manual of the ITAT which provide that filing of the CO within the period of limitation is to be ascertained after verifying the acknowledgement due card as token of receipt of the copy of Memorandum of Appeal issued to the Respondent. In short, considering that since the notice of appeal dispatched on 02.03.2012 did not return unserved presumption of service of notice gets attracted. This shows that the COs have been filed by the assessee after expiry more than one and a half month of Revenue s having filed the appeals and arc barred by limitation and need to be dismissed. The assessee has suppressed this vital fact before Hon'ble ITAT and there is no prayer before the Hon'ble Tribunal for condonation of this delay. 9. On perusal of the case records, we find that appeals of the Revenue were received on 02/03/2012 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued U/s 153C and the assessment order passed U/s 153C/143(3) are illegal, bad in law, without jurisdiction and barred by time limitation. 2. That the documents found during search proceedings, as referred to in the satisfaction note, do not belong to assessee as the same were part of working papers of the C.A Sh. B.K. Dhingra in whose office the search was conducted. Hence, the notice issued U/s 153C, based on said documents, is illegal, bad in law and without jurisdiction. 3. That admittedly, as recorded in the satisfaction note, no seized document related to the relevant assessment year was found and the seized paper referred in the said satisfaction note were duly reflected in the regular books of A/c and no incriminating material was found. Hence the notice issued U/s 153C is illegal, bad in law without jurisdiction. 4. That in view of the facts circumstances of the case the CIT (A) has erred on facts and in law in holding that the assessment has been framed in conformity with statutory provision of Section 153C r/w Section 153 A of the Act. 5. That in view of the facts and circumstances of the case the CIT(A) has erred in facts and on law in upholdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the case as under: 4. The assessee company belongs to the Thapar Group of cases. One of the main allegations against the group is that several concerns have been floated by the group with dummy Directors and shareholders. Their concerns are basically capital formation concerns which have build up huge reserves surpluses over the years. These reserve surpluses are declared invested in stocks of textiles. As and when cash is required the stocks are sold and the money is utilized for other purposes as per requirement. 11.3 The Assessing Officer noted that the assessee company was incorporated on 10/01/2000 and filed its returns with income tax regularly. The assessee declared a closing stock of ₹ 4,99,86,780/-as on 31/03/2002, which forms opening stock for the previous year under consideration. During the year, the assessee shown purchase of textile goods of ₹ 35,21,200/- and shown sales of ₹ 37,95,678/-. The assessee did not file any sales tax returns claiming the goods as tax exempt. The entire purchases were shown in cash and no bank account was maintained. The investigation wing of the income tax Department reported that no evidence of st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 153C, other grounds challenging the jurisdiction of the Assessing Officer, grounds of denial of natural Justice etc. however as far as merit of additions was concerned, the Ld. CIT-A allowed the grounds of the assessee. 11.8 Aggrieved with the order of the Ld. CIT-A, both the Revenue and the assessee are before the Tribunal raising grounds in appeal and cross objections respectively. 12. In the cross objections, the assessee have challenged jurisdiction assumed under section 153C of the Act by the Assessing Officer. As the issue of jurisdiction goes to the root of matters, we first take up the cross objections raised by the assessee for adjudication. 13. In the ground No. 1, the assessee has challenged the notice issued under section 153C of the Act and assessment completed under section 153C/143(3) on the ground that same are illegal, bad in law, without jurisdiction and barred by time limitation. In ground No. 2, the assessee has raised the issue that the documents found during search proceedings and referred in satisfaction note did not belong to the assessee and therefore notice under section 153C based on said documents is illegal, bad in law and without ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded the satisfaction. Further, no satisfaction is recorded by the Assessing Officer of the searched party gets supported by the reply received in pursuance to RTI filed wherein it has been clearly stated that no satisfaction note is available/recorded in respect of other entities. RTI was filed asking whether any satisfaction has been recorded in the files of the searched parties. 15.1 Reliance has been placed on the following decisions of the Income Tax Appellate Tribunal (in short the Tribunal ): 1. Natural Products Biotech Ltd. Vs. DCIT, (2015) 153 ITD 58 (Delhi) 2. DSL Properties Private Limited Vs. DCIT, (2013) 60 SOT 88 (Delhi) 3. Tanvir collections (p) Ltd Vs. ACIT, (2015) 153 ITD 486 (Delhi) 4. Satkar Fincap Limited Vs. ACIT, (2016) 66 taxmann.com 107 (Delhi-Trib) 5. ACIT Vs. Command Detective and Securities Private Limited (ITA No. 4129-4134/Del/2012) 15.2 Reliance has been placed on the following decisions of the Hon ble Delhi High Court: 1. Pepsi Foods Private Limited Vs. ACIT (2014) 367 ITR 112(Del) 2. CIT Vs. RRJ Securities Ltd. (2016) 380 ITR 612 (Delhi) 3. Pr.CIT Vs. Aakash Arogya Mandir Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for early hearing filed in Court (not an incriminating document it is already part of books also). 19. In support of the contention, that there was no incriminating material and hence proceeding under 153C of the Act cannot be initiated, the reliance is placed on the decision of the Hon ble Delhi High Court in the case of CIT Vs. RRJ Securities Ltd., (2016) 380 ITR 612 (Delhi). 20. It was further submitted that in the satisfaction note there is no finding that documents do not belong to the search party. In this regard, reliance has been also placed on the circular issued by the CBDT on 31/12/2015. 21. In the written submission, it is also submitted that initiation of proceeding for assessment year 2003-04 and 2004-05 was barred by limitation in view of the decision of the Hon ble Delhi High Court in the case of CIT Vs. RRJ Securities Ltd., wherein it is held that for counting of the six years to be reopened under section 153C of the Act, the relevant date shall be date of receiving of books of accounts or documents or asset seized or requisitioned by the AO having jurisdiction over such other person . Since in this case, documents are deemed to be handed ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from appraisal report, which is available at Annexure A3 shows that satisfaction is in recorded by the AO having jurisdiction over the searched person. 7. WITHOUT PREJUDICE , Judicial decisions have held that when the Assessing Officer of the persons searched and the Assessing Officer of the person other than the persons searched are the same, then there is no need of recording satisfaction in the records of persons searched for initiation of proceedings under Section 153C of the Act. The requirement as per law is that the AO is satisfied that any money documents seized or requisitioned belongs . to a person other than the person referred to in s. 153A , then the books of account etc shall be handed over to the assessing officer having jurisdiction. What is required is that satisfaction be reached. In Appellants case, however, all the requirements laid down in S 153 Cl Pepsi/Pepsico- have been met. Assessing Officer of searched person recorded satisfaction regarding documents not belonging to searched person and then issued notices whereafter satisfaction note was placed on the folder of each person in respect of whom notices under 153C had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er documents and assets seized to AO having jurisdiction against the said third person. This ratio is not applicable when jurisdiction of both assessees vests in same AO. In case of ShriTrilok Singh Dhillon group, the AO is same. Without prejudice to the above, language of provisions of ss. 158BD and 153C is not similar. The provision of s. 153C mentions any money, bullion, jewellery or other valuable articles or thing or things or books of accounts or documents to a person other than person referred to in s. 153A. The issue of handing over comes when AO in ss. 153A and 153C is same, and then there is no question of handing over of documents etc. Impliedly, no occasion for recording satisfaction with a person subjected to s. 153C action. Alternative stand of the assessee was that the seized materials were received by the AO only on 21st Oct., 2005 i.e., much after the issue of the notice under s. 153Ci.e., 16th Feb., 2005. Therefore, there was no material available with the AO for taking such action. This issue has been taken care by us in preceding para of this order. Emphasis supplied. This decision of co-ordinate Bench of Hon ble ITAT has been followed by another co-or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shah reported in 290 ITR 433 (SC) where the Apex court upheld the additions u/s 158BC(c) r.w.s. 143(3) made u/s 2(22)(e) on the basis of seized material which the assessee had claimed was print out of the ledger account that was part of the audited books of account of the assessee reflecting investment made in RBI Relief Bonds. The law laid down, therefore, is that assessment made on the basis of seized paper, even though duly reflected in the regular books of account, will be a valid assessment u/s 158BC. The decision of Hon ble Delhi High Court in the case of Filatex India Ltd and Hon ble Karnataka High Court in the case of Canara Housing Development Company reiterate the law that once search has taken place and proceedings are initiated, the 'total income as against undisclosed income is to determined. 10. In the case of Honble Delhi High Court case of Pepsico and Pepsi Foods and ITAT order in DSL Properties Pvt. Ltd. In ITA No. 11349/Del/2012 dated 22.03.2013 under which the decisions of Inlay and Aakash Arogya were decided and under which the appellants case is sought to be treated as covered, are decided on the basis of Pepsico and Pepsi food ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguished the cases relied upon by the assessee in the written submission made earlier. It is further submitted by the Ld. CIT(DR) in his written submission that existence of undisclosed income is not a prerequisite under the provision of section 153C of the Act, and which is distinguishable from the provisions of section 158BD. Hon ble Delhi High Court in the case of SSP Aviation(supra) as well as by the Hon ble ITAT in the case of Apporva Extrusion Pvt. Ltd. ITA No. 3308/Del/2010 vide order dated 09.10.2014 and ITAT in the case of M/s. Piyush Infrastructure India Pvt. Ltd. ITA No. 1072/Del/2011 vide order dated 25.10.2012 endorse this view as does ITAT s own order in Inlay at para 17. It is a different matter that a contrary finding is given in para 11 of order in Tanvir. The learned CIT(DR) in written submission further submitted as under: i. Decisions relied upon by the learned Counsel are distinguishable on both fact and law and in clear violation of the principle of Cassus omissus that a matter which should have been, but has not been provided for in a Statute cannot be supplied by Courts, as to do so will be legislation and not construction. ii. What emerges from an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... went on to observe that even mandatory requirement can be waived by the person concerned, if such mandatory provision of law is conceived in his interest and not in the public interest. The conduct of the subject must be borne in mind while examining a complaint of non-observance of procedural rules governing such enguiries. As a rule, all such procedural rules are designed to afford a full and proper opportunity to the subject to defend himself. d) In the case of Dove Investments (P) Ltd. v. Gujarat Industrial Investment Corporation2 SCC 619theapex Court has observed that regard must be had to the context, subject-matter and object of the statutory provision in question in determining whether the same is mandatory or directory. No universal principle of law could be laid in that behalf as to whether a particular provision or enactment shall be considered mandatory or directory. It is the duty of the Court to try to get the real intention of the legislature by carefully analysing the whole scope of the statute or section or a phrase under consideration. e) In the case of P.T. Rajan v. T.P.M. Sahuj, 8 SCC 498the apex Court has said that whether a statute would be directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the written submissions of the parties and the relevant material available on record. The first issue challenging the jurisdiction under section 153C of the Act raised is whether the satisfaction note required in terms of section 153C of the Act has been recorded by the AO of the searched person or of the other person (i.e. the assessee). It is apparent from the assessment order of the assessee that a search was carried out under section 132 of the Act on Sh. BK Dhingra, Smt. Poonam Dhingra, and M/s. Madhusudhan Buildcon Private Limited and in such search proceedings material belonging to the assessee was found and seized, which led to making of the assessment under section 153C read with section 153A of the Act in the instant case. In view of the issue of satisfaction recorded by incorrect AO raised in the submission of the Ld. counsel, it is relevant to refer the section 153C(1) of the Act at the material time as under: 153C. Assessment of income of any other person.- (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly. 27. From perusal of the above provision, it is clear that when the Assessing Officer of the person searched is satisfied that undisclosed income belongs to any person other than the person searched, then the books of accounts and other documents etc. are to be handed over to the Assessing Officer having jurisdiction over such other person and after recording of the proper satisfaction by the Assessing Officer of the searched person, the Assessing Officer of the other person can proceed for determining undisclosed income of such other person. 28. Thus, we find that as far as recording of satisfaction by the Assessing Officer of the searched person is concerned, the requirement of the section 158BD and section 153C of the Act are identical. The difference is in respect of what belongs to the other person. In section 158BD, it is the undisclosed inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. 4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the other person is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD /153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court. 32. In the other decisions of the Hon ble High Court and tribunal, cited in the written submission of the assessee as well as by the learned CIT(DR), as far as the issue of recording satisfaction by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, and which are available on such records. The Ld. CIT(DR) claimed to filed such transfer note, and part of the appraisal report, however, same were not found to be enclosed with his written submission. 37. We also note that the Ld. counsel of the assessee has not certified the paper book pages filed along with the written submission, whether same were available before the lower authorities or those are additional evidences. Irrespective of the fact whether the RTI replies are additional evidence or not, even we accept those replies stating that satisfaction note were not available on the assessment records of those searched person, still that cannot conclusively prove that the satisfaction note was not recorded by the Assessing Officer in the capacity of searched person. It is also possible that sometimes, the satisfaction note is placed in the confidential folders of the Assessing Officer and may not be available on assessment records. It is also a matter of fact that copy of satisfaction note is normally sent to the Assessing Officer of other person and which is evident that a copy has been found on the records of the assessee. Thus, physical non availability of satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us towards the conclusion that the satisfaction note was not recorded by the DCIT, Central circle 17, New Delhi, in the capacity of a Assessing Officer of searched person, which is one of the essential requirement for invoking jurisdiction under section 153C of the Act and in absence of which proceedings initiated under section 153C of the Act are not validly initiated. Accordingly, we quash those proceedings. 41. The Ld. CIT(DR) in written submission has submitted that technicalities and irregularities, which do not occasion in failure of Justice should not be allowed to defeat the end of Justice and the entire proceeding conducted by the Revenue cannot be held illegal, without jurisdiction. 42. Though, we agree in principle that technicalities should not come in the way of dispensation of Justice but the issue of lack of jurisdiction cannot be ignored under the guise of a technical defect. We are not convinced with the above contention advanced on behalf of the Revenue. We fail to understand as how the requirement of recording satisfaction by the Assessing Officer of the searched person provided in the statute could be treated as a small irregularity. In our opinion it is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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